Wednesday, Jul 9, 2008
According to one student of the numbers, the answer is: no way.
Apr 24, 1998 | In the church of the digital revolution, perhaps the most sacred tenet is the belief that computers increase productivity. Personal productivity, entrepreneurial productivity, Gross National Product productivity: You name it, computers are supposed to enhance it. Even better, once those computers are all linked together in a great big network, the sky's the limit. Computers and networks, we are told, have ushered in the era of the "new economy" -- an age of boundless wealth and prosperity. As Wired Magazine declared last summer in its self-described "radically optimistic" "The Long Boom" cover story, "We are watching the beginnings of a global economic boom on a scale never experienced before. We have entered a period of sustained growth that could eventually double the world's economy every dozen years and bring increasing prosperity for -- quite literally -- billions of people on the planet."
And we owe it all to computers. Or do we? The truth may be quite different.
In March, financial journalist Jeff Madrick, author of "The End of Affluence" and former finance editor at Business Week, painted a quite different picture in a lengthy New York Review of Books essay. Madrick is writing a book on productivity, and he's spent a lot of time crunching numbers. His article makes a compelling case that computer technology, at least so far, has yet to significantly increase productivity. On the contrary, he argues, computer technology may actually be slowing the rate at which productivity grows. Access to information, says Madrick, has so leveled the competitive playing field that people are more important than ever before. In the real "new economy," talent will be at a premium, just as it was in the pre-industrial revolution past, when individual artisans ruled the economic roost.
Madrick's essay is packed with a close review of productivity figures and statistics. Salon decided to cut to the chase and catch up with Madrick at his Manhattan office, where he alternates working on his new book (due out in 1999) with his job as editor of Challenge Magazine, a bimonthly journal devoted to economics and public policy.
When you discuss the "new economy" in your New York Review of Books essay, your argument could easily be taken as a direct rebuttal of Wired's "Long Boom" story. Were you familiar with that article?
I read it. It was quite fanciful. It's a profession of faith. It's not based on serious analysis. They are essentially talking about what may happen, and I keep asking the question, "Why hasn't it happened yet?" And I don't think they have a good answer for that, except for "These things take a long time." Well, that can't pass for intellectual analysis. It's conjecture.
Would you say the same is true for the whole concept of "the new economy"? That it's nothing but conjecture?
No, I think there is a new economy. What I don't think is that it's going to result in the same kind of productivity growth that the old economy generated. I don't deny that something significant has changed. What I disagree with, and what often upsets me, is the presumption that because something has changed, and because it is technologically exciting, it will therefore automatically produce rapid economic growth. That is simply not true. It may not produce rapid economic growth, and there is good reason to believe it will produce slower economic growth than the past.
Why is that? Are you saying that computer technology slows productivity gains?
I think that's true. In the '50s, '60s and early '70s, America grew because it was the champion of the standardized product. Everybody bought the same product. And in the age of mass production, you could increase productivity very quickly if you could sell more of that product through economies of scale and economies of distribution and size. But by the '70s, consumers were pretty satiated with the same product and they started to want variety. So corporations learned how to make a variety of products more inexpensively, to fill ever smaller market niches.
How do computers fit into this?
Computer technology really assisted in the creation of variety -- computerized inventory management and computer-driven manufacturing processes allow you to change very quickly, to very rapidly manufacture a different kind of product. But an economy that offers all kinds of products [as opposed to a mass production-based economy] emphasizes innovation, not only in terms of what kind of product you make, but also in the marketing of the product, the financing of the product and the delivery and distribution of the product.
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